© Reuters. The US dollar is at its lowest level since June…and expectations of a further decline
Arabictrader.com – The US dollar continued to deepen its losses during yesterday’s trading, Thursday, as it maintained its trading near its lowest levels since last June, which it reached yesterday, after the issuance of some negative economic data in the United States, in addition to the continuation of the euro and sterling to expand their profits, and start to recover from Yesterday’s losses.
As for today, Friday, I wanted the dollar index slightly to trade at the highest levels of 102, specifically at 102.055, up by 0.21%, after it ended yesterday’s session at 101.860 points. Fed member Waller’s speech may help determine market trends today.
The effect of retail sales data and producer prices on the dollar
Data issued in the United States yesterday, Wednesday, showed that retail sales – which is one of the measures of economic activity – fell last December at their largest pace in a year, at the same time that industrial production witnessed the largest decline in nearly two years, and the producer price index also contracted. at the highest rate since last August.
This data raised the fears of many investors that the largest economy in the world is already heading towards recession, especially in light of the recent slowdown in the US labor market, which indicated that the previous interest-raising decisions of the US Federal Reserve had begun to have significant effects on the economy. country.
Those data and the pessimistic expectations of the US economy reinforced expectations that the US central bank might slow down the pace of monetary tightening and only raise interest rates by 25 basis points at its next meeting.
Accordingly, expectations of a slowdown in the pace of monetary tightening, along with recession fears, caused the dollar to be subjected to widespread selling, which pushed it to decline yesterday to its lowest level since last June, and despite the slight recovery that the US currency witnessed yesterday, the dollar also continued today to trade near this level.
Statements by members of the Federal Reserve put pressure on the dollar
After the release of the retail sales and producer prices data, some members of the US Federal Reserve made several comments about their expectations for the US economy, as well as the size of the next US Fed move, which also had an impact on the dollar’s trading today.
The expectations of most of the commenting members were that the central bank might tend to slow the pace of monetary tightening, and the Dallas state bank member expected that the Fed might tend to take slower steps and raise the final interest rate to a higher level, and the statements about slowing the pace of interest rate hikes had a negative impact on the dollar.
On the other hand, the Fed member Bullard called for raising interest rates by 50 basis points and quickly reaching the final rate, which provided some support to the dollar, albeit a slight support, in addition to the support that the dollar received as a result of calls to reach a higher final rate of interest rates.
Treasury yields provide some support to the dollar
Returns witnessed some recovery in today’s trading, with some investors seeking it as a safe haven, to hedge against a possible economic recession, which provided some support to the dollar, and sharply limited its decline.
The dollar against other major currencies
In addition to these pressures, the dollar was also subjected to some downside pressures against other major currencies, as it witnessed losses against the euro, coinciding with the statements of European Central Governor Christine Lagarde.
Lagarde stated that the euro zone economy may witness only a slight contraction, and that economic data has become more positive, at a time when the markets expect the bank to continue raising interest rates at a large pace to contain inflation.
As for its trading against the Japanese yen, the dollar-yen pair was subjected to heavy selling after the high positions it reached yesterday, which increased the dollar’s losses today.
Against the pound sterling, the dollar also witnessed some losses today, with the British currency heading to expand its profits with expectations that the Bank of England may raise interest at a strong pace at its next meeting, after the slight decline in the inflation rate in December.
dollar now
In terms of trading, it – which measures the performance of the US currency against a basket of 6 other major currencies – declined by 0.20%, to record 102.208 points.
As for its movements against currencies, it rose by 0.24%, recording $1.0820, after rising yesterday to its highest level against the US currency since last April.
At the same time, it settled against the dollar at the level of $1.2349, after rising yesterday to its highest level since mid-December, before its recent wave of losses.
Against the Japanese yen, the dollar fell by 0.28% to the level of 128.54 yen, thus erasing the yen’s losses in the previous session against the dollar, which it incurred following the issuance of the interest rate decision of the Bank of Japan.
Analysts’ expectations for the dollar’s movements
The Japanese investment bank MUFG expects that the economic data strongly supports the Federal Reserve approaching the end of the monetary tightening cycle, and therefore it supports expectations of a further decline in the dollar during the coming period, but the bank has also made it clear that it does not expect the dollar to decline much, given that it is considered a safe asset in times of economic volatility.
